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Intelligent processing and VAT: How can governments prepare for the digital economy?

Learn how intelligent processing services can answer current VAT system challenges.​

Overview

The value-added tax (VAT) system is out of shape and still operating as it did when it was first imposed 60 years ago. Delivering public service for the future requires revenue agencies to take immediate action by adopting smarter, more sustainable government solutions.

Intelligent processing addresses the tax compliance gap and works to close it by applying government analytics and transaction level data. This will allow agencies to shift to a mission productivity approach by focusing their audit efforts most effectively, ultimately achieving government cost reduction and maximizing revenue.

Analysis

VAT is imposed in more than 140 countries, and its impact on transactions is felt well outside those borders. Currently, the VAT systems account for 32 percent of the time involved in complying with tax legislation.

Despite VAT provides global governments with a significant share of their earnings—about 21 percent of total European Union government revenues—still it represents a huge area of loss.

But new technologies provide alternative ways to tackle these issues which are global in nature but local in its impact.

Recommendations

Current approaches to find government solutions for closing the tax compliance are not working. It requires a real change by reassessing the revenue agencies performance and adopting government solutions aimed at shaping up their processes, such as:

Reducing the administrative burden on businesses to deliver more economic growth than cutting tax rates. Intelligent processing can help reduce at least three of these major challenges.

Combating shadow economies with the help of electronic transactions and their correct VAT management.

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